Viavi Solutions has gotten torched over the last six months - since April 2026, its stock price has dropped 25.8% to $33.13 per share. This might have investors contemplating their next move.
Is now the time to buy Viavi Solutions, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Viavi Solutions Not Exciting?
Even with the cheaper entry price, we’re cautious about Viavi Solutions. Here are three reasons why there are better opportunities than VIAV, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Viavi Solutions grew its sales at a tepid 4.8% compounded annual growth rate. This fell short of our benchmark for the industrials sector.
2. Shrinking Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Looking at the trend in its profitability, Viavi Solutions’s operating margin decreased by 7.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Viavi Solutions’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was 6.9%.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Unfortunately, Viavi Solutions’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
Viavi Solutions isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 22.4× forward P/E (or $33.13 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at the most dominant software business in the world.
Stocks We Would Buy Instead of Viavi Solutions
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